Why financial planners beg clients not to put premium bonds in children’s names without this extra step

Thomas Wilkins • December 10, 2025 16:28

The envelope landed on the kitchen table with a soft smack. Green and white, the familiar NS&I logo in the corner. “Look,” my client said, sliding it across. “We’ve been putting £50 a month into Premium Bonds for each of the kids. All in their names. Feels good to know they’re sorted, doesn’t it?”

Her planner didn’t smile. He inhaled, slowly, the way someone does before telling you there’s spinach in your teeth. The numbers were impressive: several thousand pounds across two children, prizes reinvested, proud grandparents topping up birthdays and Christmas. It looked like responsible parenting on paper. Until he asked one question.

“What happens when your eldest turns sixteen and decides he’d rather have a car than a crack at university?”

The room shifted. You could see the mental picture change from “safe, sensible savings” to “teenager with a cash machine”. In meetings up and down the country, the same scene plays out. Parents and grandparents beam about Premium Bonds “for the kids”, and the financial planner quietly begs them to add one small step before they press buy again.

The children’s Premium Bonds problem no one mentions

Premium Bonds feel harmless. They’re from the Government-backed NS&I, your capital’s secure, prizes are tax‑free, and you can cash out quickly if life goes sideways. For anxious adults, they tick a lot of boxes. Putting them in a child’s name sounds like the obvious, generous upgrade.

What most people don’t see is the legal line they cross the moment they do that. Money in a child’s name is usually their money, not yours. You haven’t just “parked” cash for the family. You’ve gifted it outright to a specific young person, with all the strings cut.

For under‑16s, a “responsible person” (normally a parent or guardian) looks after children’s Premium Bonds. But in law, the pot belongs to the child. At sixteen, they can take control of their own NS&I account. At eighteen, it’s firmly part of their adult finances. You don’t get a special veto because you paid in most of it, or because “it was meant for uni”.

That’s the bit that makes planners wince. They’ve seen the fallout:

A carefully built lump sum used as a house deposit for a partner the family barely knows.
Savings meant for fees or training swallowed by a gap year that never quite ends.
Money locked out of reach when a parent hits a rough patch and could have used a buffer.

Let’s be honest: no‑one makes their calmest, wisest financial decisions with a fresh eighteen‑year‑old brain and a few thousand pounds at their fingertips.

What really happens when you buy Premium Bonds “in the kids’ names”

From the outside, it looks like a technicality: your name on the envelope, their name on the certificate. Inside the system, the rules are clearer – and less forgiving.

When you buy children’s Premium Bonds:

The “responsible person” controls the account until the child turns sixteen.
The money, and every prize, legally belong to the child from day one.
You cannot quietly “take it back” later if your own finances get tight.
For student finance and benefit assessments, it can count as the young person’s asset once they’re an adult.
For inheritance tax, larger gifts may still sit in the seven‑year clock, even though you no longer own the money.

None of this is disastrous on its own. If you truly want to hand that wealth over, no strings, and you’re comfortable with whatever your adult child chooses to do with it, a Premium Bond holding in their name can be perfectly reasonable.

The trouble is, most families haven’t actually decided that. They think they’re “putting something aside” and assume they’ll steer how and when it’s used. The paperwork tells a different story.

The extra step planners wish every family would take

Before you put Premium Bonds – or any savings – “in the kids’ names”, pause for one extra step:

Decide, in writing, who the money really belongs to and when the child should control it – then set the account up to match that decision.

It sounds almost too simple. Yet this is the missing piece in a lot of family money.

There are only three honest answers:

“It’s their money, now.”
You’re comfortable with a genuine gift, legally and emotionally. You accept that at sixteen/eighteen, they call the shots. In that case, children’s Premium Bonds or a Junior ISA make sense – and you live with the outcome.
“It’s for them, but we want to choose the timing and use.”
You see it as a future help with something specific: education, first home, training, a safety net. You want a say in when and how it’s used, even when they’re technically adults.
“It’s family money we’re earmarking, not gifting yet.”
You might need it back if jobs, health or housing wobble. Your intention is to help the children, but only if you can afford to when the time comes.

Most people are secretly in camp two or three while setting things up as if they were in camp one. The extra step is about bringing those two into line.

Write it down. Literally. A one‑page note, something like:

“We’re saving £50 a month in Premium Bonds in our names, earmarked for [child’s name] to support education/first home. We’d like this used around age 21–25, at our discretion. If our circumstances change significantly, we may use part of the money for family needs.”

Sign it, date it, and keep it with your wills or important papers. Tell whoever would look after the children if something happened to you. Now your money and your intentions match – and your planner can help you choose the right wrapper.

How to set things up in practice

Once you’ve done that thinking, the mechanics get much simpler. Here’s how planners typically steer it.

1. If it really is the child’s money

If you’re happy to make an outright gift:

Use the right wrapper first.
A Junior Stocks & Shares ISA is often better for long‑term growth than Premium Bonds, especially over 10+ years. Returns aren’t guaranteed, but over time, investments usually outpace the prize fund rate.
Keep Premium Bonds as the “fun” side.
If you love the idea of prizes, put a slice (not the whole pot) into children’s Premium Bonds. Treat it as a low‑risk, exciting extra, not the core of their future.
Record who gave what.
Grandparents’ gifts, godparent cheques, your monthly standing order – keep a simple note. It helps with family fairness, inheritance tax records and general peace of mind.
Talk about it as they grow.
Let teenagers know what’s there and what you hope it will help with. You can’t legally tie their hands, but you can shape expectations long before they log in at sixteen.

2. If you want to keep control and flexibility

If your honest answer is “it’s for them, but we may need to steer it or fall back on it”:

Hold the Premium Bonds in your own name.
Use an NS&I account in your name, and keep a separate holding or a clear label for each child (e.g. “Ella – uni fund”). In legal terms, it stays your asset; in moral terms, you’re ring‑fencing it.
Use designations or nicknames.
Some platforms allow you to add a reference to pots. Where they don’t, your own spreadsheet or notebook works. The goal is that anyone looking at your finances can see what you meant this money for.
Pair it with that written note.
The side letter is what tells your future self – and your executors – how you wanted this pot used. It’s not a formal trust deed, but it’s far better than leaving everyone to guess.
Review when life changes.
New baby, job loss, house move, illness – each is a reason to check your “for the kids” pots and decide if the plan still fits.

3. If grandparents are doing the gifting

This is where planners quietly panic the most. A well‑meaning grandparent can shift thousands into a child’s name in good faith, never realising the strings they’ve cut.

Gently suggest they:

Agree, together, whether gifts should go into their own names for now, or into a Junior ISA/children’s Premium Bonds.
Keep gifts within the common allowances where possible (like the £3,000 annual exemption for inheritance tax), especially if their estate is already large.
Add their own short note of intention if they’d be heartbroken to see the money spent a different way.

A ten‑minute family chat can save ten years of quiet resentment later.

Premium Bonds for children: the main options, side by side

Option	Main upside	Main watch‑out
Premium Bonds in the child’s name	True, tax‑free gift; child learns about money; outside your reach if you’re tempted to raid it	Child controls from 16; you can’t redirect later; may affect assessments once they’re adults
Premium Bonds in your name “for them”	You keep control and flexibility; easier to adjust to life changes; still safe, NS&I‑backed	Counts as your asset for inheritance tax and care‑fee means‑tests; relies on you (and your will) to honour the plan
Junior ISA (plus optional Bonds)	Long‑term, tax‑free growth; ring‑fenced for the child at 18; clear structure	Locked until 18; child still controls at adulthood; investment values can go down as well as up

None of these are “wrong”. The question is whether the one you’ve picked matches what you actually want to happen.

Why planners don’t hate Premium Bonds – they hate drift

Most financial planners are not anti‑Premium Bond. They’re anti‑drift. Premium Bonds are easy to buy, easy to explain to relatives, and feel safer than markets. But without that extra step – the ownership decision and the short note – they become a fuzzy corner of the balance sheet that nobody quite understands until there’s a crisis or a teenager involved.

Used deliberately, they can be helpful:

As a short‑to‑medium‑term parking spot for money you might need back within a few years.
As a “prize pot” that lets children check for wins and learn about saving.
As a top‑up once you’ve maxed out more efficient long‑term wrappers like ISAs and pensions.

The shift is small but powerful: from “We’re shoving money into Premium Bonds for the kids” to “We know whose money this is, what it’s for, and when it should be used.”

That’s the extra step planners beg for. Decide, write it down, and then click “Buy”. The Bonds will behave exactly as they always have. The difference is, your plan will too.

FAQ:

Are Premium Bonds in a child’s name better than a Junior ISA?
Not automatically. Premium Bonds protect capital but don’t guarantee any return; a Junior ISA invested sensibly has more growth potential over long periods, though values can fall. The “better” choice depends on time frame, risk comfort and what you want the money to do.

Will my child really be able to cash everything in at 18?
If the money is legally theirs (in their own Premium Bond holding or Junior ISA), yes – they have full control as adults. You can guide and influence, but you no longer have a legal say.

If I hold Premium Bonds in my name “for the kids”, is that a trust?
In simple terms, you’re keeping ownership while earmarking the money. A formal trust is more complex and needs proper legal advice. A side note of intention is not a legal trust deed, but it’s far clearer than doing nothing.

Could this affect student loans or benefits?
Money in the young person’s name can count when assessing eligibility once they’re adults. Money still in your name is assessed as yours instead. Rules change, so it’s wise to check current guidance near the time.

Should I move existing children’s Premium Bonds out of their names?
You can cash in and start again in your own name if you now realise you need more control. But think carefully, and consider advice if sums are large. The key is to make future contributions match your actual intentions, rather than panicking about past ones.